Germany-based SMA Solar is to acquire Danfoss’ solar inverter business.
Danfoss will acquire 20% of SMA’s shares with a value of €302 million (US$415 million) in return for selling its inverter unit.
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It will receive SMA shares at a price of €43.57 50% premium on the average price during (US$59.86) the past 60 days.
The alliance between SMA and Danfoss brings together respectively the world's largest and seventh largest inverter manufacturers by market share, according to an IHS study published in May.
“The strategic alliance with Danfoss strengthens SMA’s leading position in the global photovoltaic market. We are faced with a highly competitive market environment and increased price pressure,” said Pierre-Pascal Urbon, chief executive of SMA.
“In this context, SMA will benefit from Danfoss’ years of experience in automated drives. This market has been characterised by fierce competition for a long time. Accordingly, the strategy of the Danfoss group targets continuous cost improvements through global sourcing and cost down initiatives. By establishing a close cooperation there is significant potential to improve the cost position in both companies,” added Urbon
The inverter market has been hit by the emergence of bigger utility projects that require larger but fewer inverters, and the rise of new players in the microinverter market that have stolen share in the residential sector.
“The tie-up does not come as a huge surprise given the struggles the industry currently faces as it deals with a shrinking European market, rapid price declines but conversely booming overseas demand,” said Ash Sharma, senior director of Solar Research, IHS.
“Combined, SMA and Danfoss held an 25% share of the global solar inverter market in 2013, down from 35% in 2012, and more than 35% of the European market. This tie-up undoubtedly strengthens their position but also provides SMA with other benefits,” said Sharma.
“Firstly, the alliance will open up a cheaper supply of components to SMA via Danfoss’ much greater purchasing power. This alone will drive down SMA’s bill of materials; if in addition SMA has access to Danfoss’ manufacturing facilities this will further allow SMA to drive down costs using Danfoss’ economies of scales.
“Secondly, this deal allows SMA to take advantage of Danfoss’ design and manufacturing expertise. Technically, solar inverters are very similar in design to drives which Danfoss has manufactured for more than 40 years,” added Sharma.